Slumping commodity prices are putting strong pressure on mining companies to reduce the costs of doing business. Since energy costs comprise an ever-increasing portion of mining operators’ expenses, attention is focused on the price of diesel, transportation expenses to remote sites and full cost-recovery efforts by power utilities, some of whom are also facing the loss of local government subsidies.

This means new interest is being shown for renewable energy as a viable complementary option for mines. Renewable energy sources such as hydropower, wind and solar are being incorporated into broader power supply portfolios in key mining regions, such as the U.S., Canada, Australia and Chile.
The rise of renewable energy as a viable addition is evident in parts of the world where mandatory “load shedding” – a deliberate shutdown of power to reduce power load on the system – or other factors have made power supplies unreliable. At the 2015 Mining Indaba Conference in Cape Town, South Africa, former U.K. Prime Minister Tony Blair implored mining industry leaders to recognize the importance of a secure, sufficient and sustainable energy supply to the continent’s growth.

For mining operators, the drag created by energy costs is most pronounced in remote areas such as northern Chile, West Africa or in the Arctic, where remote mines use on-site diesel power, since grid power is unavailable. Delivering diesel fuel to these remote sites can be expensive and delayed by weather conditions, leaving mines at risk of running low on fuel and potentially shutting down.

“When one considers that operators must balance shareholder demand for improved performance and increased public pressure for sustainability, it’s clear that renewable energy should be considered for integrating with coal, diesel and nuclear sources,” said Dennis Gibson, a former Rio Tinto executive who recently became Black & Veatch’s Chief Technical Officer for its mining business. “Costs can be reduced, and operators can take significant strides toward meeting jurisdictional carbon regulations and growing public calls for reduced greenhouse gas emissions.”

Integrating Renewable Energy Sources

Integrating renewable energy into a traditional coal-fired or diesel power supply can reduce coal/diesel consumption by generating electricity when the wind is blowing or the sun is shining. When the renewable system is not generating power, diesel generators ensure the mine’s energy demands are met without interruption.

Capital costs are associated with adding renewable energy to the mix, Gibson noted, but investing upfront capital may generate overall cost savings, in addition to sustainability benefits of reduced greenhouse emissions. Depending upon the specific location and availability of solar and wind power, low- to medium-penetration renewable power systems can be integrated with diesel power to meet 10 to 30 percent of the mine’s energy demand. This results in a direct fuel cost savings and a reduction in the number of fuel deliveries required. The mining operation will realize lower risk and more certain energy cost forecasting, offsetting the upfront capital cost, Gibson said.

Benefits of incorporating renewable energy into a site’s operation will depend on numerous factors. Chris Mertes, a renewable energy consultant for Black & Veatch, offers a hypothetical example: A remote mine site may have an average power demand of 5 megawatts, or about 44 million kilowatt-hours (kWh) per year. If one assumes energy generated using diesel costs of $0.30 per kWh, the total energy cost for the mine may be approximately $13 million per year. Integrating wind power to generate 15 percent of the site’s energy supply – or about 6,570,000 kWh – at $0.10 per kWh would result in a roughly 10 percent savings in overall energy costs.

It may be difficult to assess the potential savings without a site-specific review of a mine’s power needs, but renewable sources offer great potential, Mertes said.

A Strong Signal for Sustainability

Many believe the current ebbs in fuel prices will inevitably give way to a rebound. The global market for diesel is much smaller than oil and has proven more resilient against price drops than gasoline. Diesel prices have started to rise.

The incorporation of renewable energy to offset or complement diesel use can send a strong signal to stakeholders, regulators and environmentalists that the operator is committed to extraction that is both profitable and environmentally responsible, Gibson said.

“In addition to improving the security of power supply, the industry has a golden opportunity to demonstrate a more progressive sustainability side of the business,” Gibson said. “Most importantly, the opportunity offers significant cost-containment at a time when the market demands it.

“Favorable environmental factors such as plentiful solar, wind or hydropower make renewables a sensible addition to the mining operation’s power portfolio mix in terms of cost and boosting reliability of supply,” said Gibson in closing.

Published originally on Black & Veatch Solutions.